Editors Notes: This is exciting news to see a major bank in Canada finally participate in the Cannabis industry and start financing larger cannabis licensed producers, the fact that Canopy has a $7 Billion dollar market cap and now big banks are investing in the space gives credibility to the Canadian cannabis sector.

Original Article:

Bank of Montreal became the first major Canadian bank to lead an equity financing for a public company in the medical marijuana sector, underwriting a $175-million stock sale for Canopy Growth Corp.

The bank's capital-markets arm and GMP Capital Inc. will be the co-lead underwriters on the bought deal financing, which was announced after the markets closed Wednesday. The deal was done at a price of $34.60 per share, or 8 percent below the company's closing share price on Wednesday.

Pot stocks have whipsawed in recent weeks, climbing sharply at the start of 2018 before selling off amid concerns about regulatory changes in the United States. Canopy, the largest Canadian public company in the cannabis sector with a market capitalization of $7.2-billion, has seen its shares climb 26 percent since the start of the year – yet they have fallen more than 10 percent since Jan. 9.

Canada's big banks have been hesitant to get involved in a visible way in the burgeoning marijuana sector because they have significant operations in the United States, where there is considerable conflict and uncertainty surrounding marijuana laws. The drug is legal in many U.S. states, at least for medical use, and on Jan. 1 California became the largest state to legalize it for recreational use for adults. Yet it is still illegal under U.S. federal law.

Since Canopy is one of the Canadian-headquartered cannabis companies that has no operations in the United States, it is considered a safer one for banks to do business with.

BMO was "very grueling about the fact that they are not looking to work with companies that break American law," said Bruce Linton, chief executive officer at Canopy.

Canopy's size and inclusion in the S&P/TSX composite index also means that it has a broader following among institutional investors.

"I think this signals a new normal," Mr. Linton added, referring to BMO entering the sector. "What I think is going to happen is the institutional buyers who've said we don't really do this because banks don't do this are going to say 'shoot, we really should do this.'"

Canopy is raising funds at a particularly tumultuous moment for the industry.

Days ago, U.S. Attorney-General Jeff Sessions revoked Obama-era guidelines, referred to as the Cole Memo, that limited how federal prosecutors could investigate and prosecute state-licensed marijuana production and distribution.

At the same time, the Canadian Securities Administrators (CSA) has said it is rethinking existing rules that allow marijuana firms with U.S. operations to go public on the stock market and raise money in Canada, as long as they disclose the legal risks they face south of the border.

Bank of Montreal has a relatively new CEO -- 46-year-old Darryl White took the top job last November -- who is a former investment banker. The bank has an extensive retail network in the U.S., along with significant U.S. capital markets operations. However, this deal doesn't indicate that the bank would be willing to support deals with cross-border cannabis companies.

Executives at Canada's other bank-owned investment dealers are expected to re-visit their policies on taking part in cannabis financings in the wake of BMO's participation in the Canopy Growth offering. An executive at a rival bank said late Wednesday: "We are reviewing our interpretation of the rules as we speak, and I imagine every other bank is doing the same."

The deal comes amid a hot market for financings related to marijuana stocks. Already, the amount raised in equity deals since the start of 2018 is closing in on $700-million in Canada. Until now, deals have largely been led by independent investment dealers such as GMP Capital Inc., Canaccord Genuity Group Inc. and Eight Capital, with the capital-markets arms of the Big Six banks on the sidelines.

The Green Organic Dutchman Holdings Ltd. (the “Company” or “TGOD”) is pleased to announce the closing of its previously announced brokered and non-brokered private placements. TGOD has issued 67,878,788 Units (the “Units”) at a price of $1.65 per Unit, for gross proceeds of $112,000,000. Each Unit consists of one common share of the Company (a “Common Share“) and one-half common share purchase warrant of the Company (a “Warrant“). Each whole Warrant is exercisable into one Common Share (the “Warrant Share“) at the exercise price of $3.00 per share and has an expiry date that is the earlier of (a) 36 months from the date the Common Shares commence trading on a recognized stock exchange (the “Listing Date“), and (b) February 28, 2021. The Company will make all reasonable efforts to ensure the Warrants are listed on the same exchange on which the Common Shares are listed.

The Company is pleased to announce the closing of Aurora Cannabis Inc.’s (TSX: ACB) strategic investment into TGOD. The investment consists of 33,333,334 Units, priced at $1.65 per Unit, for gross proceeds of $55 million.

To date, the Company has raised a total of $160 million, fully funding the expansion of 970,000 sq. ft. state-of-the-art, ultra-high technology hybrid greenhouse facilities in Ancaster, Ontario and Valleyfield, Quebec. TGOD’s expansion and strategic partnership with Aurora positions the Company as an industry leader and sets the foundation for the highly anticipated upcoming 2018 IPO.

Upon completion of the Company’s expansion, it is expected to be one of the largest and most technologically advanced cannabis production facilities in the world, producing ultra-low cost, premium-quality organic cannabis. Additionally, TGOD’s facilities will be LEED certified and operating with close to a zero-carbon footprint with some of the lowest-cost power rates in the country.

LEED, stands for “Leadership in Energy and Environmental Design”, is an internationally recognized green building certification system, providing third-party verification that a building was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.

In addition to Aurora’s investment in TGOD, the companies shall enter into a supply agreement, providing Aurora with the right to purchase up to 20% of TGOD’s annual production of premium high-quality organic cannabis.

Further, Aurora and Aurora Larssen Projects Inc. (“ALPS”) will provide additional services to TGOD on the completion and commissioning of its Ancaster and Valleyfield facilities, which are anticipated for Winter 2018. The facilities, when completed, will have an annual production capacity of 116,000 kg of premium, high-quality organic cannabis.

“Teaming up with Aurora, the industry’s innovation leader, provides us with a stable, supportive shareholder, through whom we have access to best-in-class technologies and industry know-how. This will significantly accelerate our time to market and establish TGOD as the world’s leading provider of premium organic cannabis,” said Csaba Reider, President of TGOD.

“The supply agreement with Aurora validates our strategy to produce premium-priced organic cannabis. With this significant cornerstone investor and customer, we will be able to leverage our deep consumer packaged goods and brand building experience, as well as Aurora`s well-established brand recognition to pursue rapid growth,” said Mr. Reider.

Rob Anderson, TGOD chief executive officer, added: “Partnering with the industry leader in terms of innovation and execution validates how TGOD’s differentiated business model creates substantial value for our partners and shareholders. This is a synergistic partnership that will help TGOD reach an international audience with its premium products and rapidly capture market share in this incredibly dynamic market, and will provide further differentiation and diversification to Aurora’s product offering. We look forward to working with the teams at ALPS and Aurora as we execute on our de-risked but aggressive growth strategy.”

Investors looking to learn more about TGOD may visit the Company’s Investor Centre at https://tgod.ca/investor-centre/ or contact the Company at invest@tgod.ca, and patients may now register for the Company’s beta patient program at https://tgod.ca/patients/

The Company grows high quality, organic medical cannabis with sustainable, all natural principles. The Green Organic Dutchman Holdings Ltd. products are laboratory tested to ensure patients have access to a standardized, safe and consistent product.

TGOD has a funded capacity of 116,000 kg and is situated on 175 acres of land between two of the most populated areas of Canada; Ontario & Quebec. TGOD owns one of the largest land packages in Canada with some of the lowest power rates in the country. The Company is building a combined 970,000 sq. ft. facility capable of producing 116,000 kg of premium, high- quality, organic cannabis. To date, the Company has raised $160 million dollars and has over 4,000 shareholders.

The Green Organic Dutchman Holdings Ltd. is licensed under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) to cultivate medical cannabis. The Green Organic Dutchman Holdings Ltd. carries out its principal activities producing cannabis from its facilities in Ancaster, Ont., pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.

This news release contains forward-looking information, which includes known and unknown risks, uncertainties and other factors that may cause actual events to differ materially from current expectations. Important factors — including the availability of funds, the results of financing efforts and the parties’ due diligence reviews, and general market conditions — that could cause actual results to differ materially from the Company’s expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The company disclaims any intention or obligation, except to the extent required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Charles Alovisetti is a senior associate and co-chair of the corporate department at Vicente Sederberg LLC, and works with legal cannabis businesses in the U.S.

In this opinion piece, Alovisetti warns such enterprises to be wary of using bitcoin or other cryptocurrencies as a solution to the pot industry's continued difficulty obtaining or keeping bank accounts (a familiar problem for blockchain startups.)

One of the major challenges facing legal marijuana businesses is lack of consistent access to banking services. Many marijuana businesses do have banking accounts, but the sword of Damocles dangles above them, always threatening an unappealable termination of an account.

Enter digital currencies, which promise an end run around a wary financial system. There is a great deal of excitement in the marijuana industry about the possibilities regarding bitcoin and other cryptocurrencies.

But before the cannabis industry gets carried away with images of marijuana businesses sidestepping hostile federal banking regulators, we need to take a hard look at the future of digital currencies.

Alternative prescriptions

One strategy that's been pushed is for cannabis businesses to take an existing digital currency and simply use it as a method of transacting business to avoid the need to rely on banks.

This way, marijuana companies without bank accounts could eliminate the need to operate in cash, instead accepting payment directly from customers or other businesses in digital currency – although converting digital currency into dollars will still require a bank account.

Another possible use of digital currencies would be to develop a new token, often referred to as an app coin, protocol token, or altcoin, specifically for the marijuana industry. Again, the goal would be to reduce or eliminate the use of cash and integrate blockchain technology into the compliance and other needs of marijuana businesses.

Finally, some business offer bitcoin-based payment processing services. These services allow customers to purchase bitcoin via a credit or debit card and then purchase a marijuana product with the recently acquired bitcoin. The store then converts the bitcoin back into dollars. The idea is to provide an alternative to traditional payment processing services and credit card companies that will not work with marijuana businesses.

Harsh realities

However, regulators present a real and present threat to cryptocurrencies as they currently exist; for example, recent Chinese regulatory restrictions have seen the closure of platforms allowing people to buy or sell tokens.

And these threats become even more important for digital currencies servicing marijuana-related businesses ("MRBs" in the parlance of the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, or FinCEN).

As longtime CoinDesk readers will recall, in March 2013, FinCEN published its initial guidance on virtual currencies. The agency defined three categories of participants: users, exchangers and administrators. A user is "a person that obtains virtual currency to purchase goods or services," whereas an exchanger is "a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency" and an administrator is "a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency."

FinCEN concluded that, barring any specific exemption, exchangers and administrators are money service businesses (MSBs) and as such are subject to FinCEN registration and the framework of the Bank Secrecy Act (BSA), which was designed to aid FinCEN's investigations of potential criminal activity.

On the marijuana side of the equation, it is important to note that, while marijuana remains illegal federally, the industry in the U.S. exists in its current form because it is tolerated pursuant to federal policy, as set forth in the Cole Memo (put out by the Department of Justice on Aug. 29, 2013).

The Cole Memo states that while marijuana remains illegal federally, federal law enforcement should not consider prosecution of state-legal marijuana businesses if those business do not implicate any of eight enumerated enforcement priorities (e.g. preventing revenue from the sale of marijuana from going to criminal enterprises and preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or illegal activity).

A potent brew

While it is unfair to associate all digital currency use with illicit activity, there is a perception, reinforced by certain bad actors, that digital currencies are being used to launder money, divert revenue to criminal enterprises and traffic illicit drugs. Any risk that a business could be seen as violating the Cole Memo priorities needs to be treated extremely seriously as it could provoke a federal law enforcement action.

While the Cole Memo addressed violations of the Controlled Substances Act (CSA), it was silent as to financial crimes that would inevitably result from the use or banking of proceeds of a federally illegal activity. In response to financial institutions' concerns regarding accepting MRBs as clients, on Feb. 14, 2014, in two memos often referred to as the "Valentine's Day Letters," the Department of Justice and FinCEN each outlined their respective attitudes to money laundering concerns related to the violations of the CSA.

The FinCEN memo contained detailed guidelines on how to provide banking services to an MRB while remaining compliant with the BSA. These guidelines included the obligation to file different types of suspicious activity reports (SARs) in response to activity on the part of an MRB. The new DOJ memo updated the earlier Cole Memo to extend the realm of non-priority violations to include provisions of the money laundering statutes, the unlicensed money remitter statute and the BSA triggered by underlying violations of the CSA.

But the DOJ reiterated that any exercise of discretion regarding its resources was subject to the provision of services to an MRB whose activities do not trigger any of the eight priority factors. The DOJ also noted that following the FinCEN guidance was critical to remaining within the low enforcement priority category of the Cole Memo.

Again, FinCEN has also made it clear BSA compliance obligations also apply to many businesses dealing in digital currencies – exchanges, ATM operators and payment processors are all required to register as MSBs. That means that to comply with the Cole Memo and FinCEN's marijuana policy guidance, any digital currency business that is required to register as an MSB must make the required SAR reports outlined in the Feb. 14, 2014, FinCEN guidance.

Just say no

When it comes to marijuana firms using cryptocurrencies, discretion should remain the better part of valor.

The marijuana industry in the U.S. exists solely due to permissive federal policies that require businesses to follow certain guidelines, including filings SARs with FinCEN. If these guidelines are not being followed to the letter, which is a challenging and sometimes onerous task, a business is no longer within the guidance of the Cole Memo and is at higher risk of facing federal law enforcement action.

And even if these guidelines are religiously adhered to, while FinCEN-compliant use of digital currencies is not explicitly prohibited by federal policy, their use is sometimes linked by law enforcement with money laundering, illicit drug sales and other illegal activities.

As these crimes are listed as prevention priorities in the Cole Memo, digital currency use could potentially provide an excuse for Attorney General Jeff Sessions (no fan of legal marijuana) to crack down on state-legal pot enterprises.

Further to the press release dated October 5th, 2017, The Green Organic Dutchman Holdings Ltd. (the “Company” or “TGOD”) is pleased to announce a further increase to its non-brokered offering (the “Offering”) of 3,636,050 units (“Units”) at the price of $1.65 per Unit, for total aggregate gross cash proceeds of $36,000,112 from both the Offering and the concurrent brokered offering.

The Company will provide investors with an offering memorandum (the “OM”), which will allow non-accredited investors across Canada and international jurisdictions to participate in the Offering.

“From day one we have implemented an inclusive ‘retail first’ approach at TGOD, and this financing is a continuation of that effort. This OM allows non-accredited retail investors the unique opportunity to become shareholders of our Company before our Initial Public Offering,” stated Danny Brody, Vice President of Investor Relations.

The terms of the Offering remain unchanged, with each Unit consisting of one common share of the Company (a "Common Share") and one-half common share purchase warrant of the Company (a "Warrant"). Each whole Warrant is exercisable into one Common Share (the "Warrant Share") at the exercise price of $3.00 per Warrant Share and has an expiry date that is the earlier of (a) 36 months from the date the Common Shares commence trading on a recognized stock exchange (the "Listing Date"), and (b) February 28, 2021. The Company will make all reasonable efforts to ensure the Warrants are listed on the same exchange on which the Common Shares are listed.

The Company intends to use the net proceeds of the Offering to advance the Company’s cannabis facilities in Ontario and Quebec and for general working capital purposes.

Constellation Brands Inc. (STZ) has agreed to take a 9.9% stake in Canopy Growth Corp. WEED , a Canadian marijuana company, and plans to work with the grower to develop and market cannabis-infused beverages.

Canopy Growth is the world’s largest publicly traded cannabis company, with a market valuation of 2.2 billion Canadian dollars on the Toronto Stock Exchange. The C$245 million (US$191 million) deal gives Constellation a toehold in an industry that the brewer expects to be legalized nationwide in the U.S. in the coming years.

“We think that it’s highly likely, given what’s happened at the state level,” Rob Sands, chief executive of the Victor, N.Y.-based beer, wine and spirits company, said in an interview. “We’re obviously trying to get first-mover advantage.”

Constellation—flush with cash after posting a 13% increase in beer sales in its latest quarter—is interested in developing drinkable cannabis products that don’t contain alcohol, he said. Products currently on the market in U.S. states where they are legal include buzz-inducing sodas, coffees and fruit elixirs.

A worker trims medical marijuana plants at a facility in Canada, where recreational use is expected to soon be legalized.

Constellation doesn’t plan to sell such a product in the U.S. before marijuana is legalized there nationwide, Mr. Sands said, but could sell it in Canada, where edible and drinkable cannabis products are expected to be legalized by 2019, or other countries where recreational marijuana is permitted.

Independent research firm Euromonitor International estimates that the legal marijuana market in 2018 will be US$7.5 billion in Canada and $10.2 billion in the U.S.

U.S. beer-industry executives have been debating whether legalized marijuana could cannibalize sales of beer, even as other consumers migrate from beer to wine and spirits. Some brewers have experimented with cannabis-infused beers, not containing THC but instead a marijuana flavor.

“Wine and spirits are not sitting still, and marijuana is being legalized in many states,” Heineken USA Chief Executive Ronald den Elzen said at a beer wholesalers conference earlier this month. “We have to act now, and we have to do it together.”

Mr. Sands said he doesn’t see pot as a threat to booze. But if a consumer is going to choose a can of beer, a glass of wine, a shot of liquor or a weed-laced elixir, he wants to be able to offer all four, he said.

An employee with medicinal marijuana plants at Canopy Growth in Smith Falls, Ontario.

“Could it be a threat? Yes, I guess it could be,” he said. “We’re not going to stand around twiddling our thumbs.”

Medical use of marijuana has been legal in Canada since 2001. The country is expected to legalize recreational use, not including edibles, by July 2018, with edible and drinkable products expected to become legal the following year. In the U.S., eight states plus the District of Columbia have legalized marijuana, and more than 20 states have legalized it for medical purposes.

Constellation doesn’t plan to lobby for or against marijuana legalization in the U.S., Mr. Sands said.

Canopy Growth, based in Smiths Falls, Ontario, is ramping up capacity ahead of next summer’s legalization in Canada and said it would use the new capital to expand its production and storage facilities throughout the country.

The deal, expected to close by early November, gives Constellation board-observer status and the option to increase its stake to just under 20%. Canopy Growth CEO Bruce Linton said Constellation’s expertise in alcohol distribution would be helpful for the cannabis company as it determines how to distribute and package recreational cannabis. Canada’s provincial regulators are still considering how to handle the selling of marijuana, he said.

Mr. Linton said he hoped the deal could be the turning point for the nascent industry, signaling to institutional investors “that a cannabis company that fully complies within legal jurisdictions would be the right place to invest."

There are 69 publicly traded cannabis companies listed on Canada’s three main stock markets, representing about C$8 billion in market capitalization. The bulk of the trades in Canada are conducted by retail investors.